Gold Rises in London as Slump in Stocks Increases Haven Appeal

By Nicholas Larkin

Nov. 20 (Bloomberg) -- Gold rose in London as tumbling stocks worldwide and data signaling a deeper recession increased bullion's appeal as an alternative investment.

European and Asian equities fell. The benchmark MSCI World Index slumped to its lowest since 2003 while yields on two-year Treasury notes reached an all-time low. Japanese exports declined the most in almost seven years and U.S. consumer prices dropped the most on record.

``We've seen equity markets back under pressure again,'' James Moore, an analyst at TheBullionDesk.com, said by phone today. ``We're starting to see some more investment in safe-haven assets. People are still expecting gloomy data.''

Gold for immediate delivery gained $14.85, or 2 percent, to $749.40 an ounce as of 1:14 p.m. in London. December futures were $12.50, or 1.7 percent, higher at $748.50 in electronic trading on the Comex division of the New York Mercantile Exchange.

The metal fell to $745.25 in the morning ``fixing'' in London used by some mining companies to sell production, from $762 at the previous afternoon fixing. Gold, heading for a third weekly gain, has slipped 28 percent since reaching a record $1,032.70 an ounce in March.

The U.S. Federal Reserve will probably cut interest rates to zero percent over the next two months to staunch deflation, JPMorgan Chase & Co. said in a note to investors. The Bank of England signaled yesterday it's prepared to cut rates further, after reducing the main rate to the lowest level since 1955.

U.S. Unemployment

U.K. retail sales fell for a second month in October as rising unemployment and the financial crisis dissuaded shoppers from spending. A U.S. report at 1:30 p.m. London time may show first-time claims for jobless benefits in the country stayed near a seven-year high last week, while total benefit rolls in the prior week probably rose to the highest level since 1983, according to a Bloomberg survey.

``The return of investment interest into gold ETFs is encouraging,'' Moore wrote in a note today. Gold's failure to rise above $765 an ounce yesterday ``suggests the metal is vulnerable to another test lower.''

Gold in the SPDR Gold Trust, the largest exchange-traded fund backed by bullion, increased by more than 3 metric tons to 752 tons as of today, according to data on the company's Web site. Assets held in exchange-traded funds managed by ETF Securities Ltd. gained 1.3 percent to 1.540 million ounces on Nov. 18, its Web site showed.

Bullion demand increased 18 percent to 1,133.4 tons in the third quarter from a year earlier, as lower prices encouraged purchases by jewelers and as investors sought a haven, the World Gold Council said yesterday. So-called identifiable investment, which includes purchases through ETFs and of bars and coins, climbed 56 percent.

Auto Woes

Among other metals for immediate delivery in London, silver added 1.7 percent to $9.415 an ounce. Platinum fell $6.50, or 0.8 percent, to $811.50 an ounce and palladium was $1.50, or 0.8 percent lower, at $182 an ounce.

Japan's Finance Ministry today said auto shipments fell 15 percent in October, while Nissan Motor Co. has said that second- half profit will fall to ``zero'' as a recession pushes U.S. vehicle sales to the lowest annual tally in 15 years. Automakers account for more than 60 percent of global platinum consumption, according to estimates by metals refiner and trader Johnson Matthey Plc.

``Investors have a window of opportunity to buy'' platinum as subdued supply growth from South Africa may keep the metal in deficit until 2012, Edison Investment Research wrote in a note. Platinum will average $1,350 an ounce in 2009, it said.

To contact the reporter on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net